IN THE LONG RUN, THE REAL ESTATE MARKET WILL GRADUALLY RECOVER, AS THIS IS A KEY SECTOR OF THE ECONOMY
What dynamics do you expect in the real estate market prices in the short, medium and long term? Would you justify?
In the short term, in my opinion, the dynamics of the real estate market can not be talked about. Most transactions have been suspended, exceptional contracts have been concluded for properties for which there is already an agreement and the parties have not been affected by the imposed state of emergency in our country. The latter applies to the housing sector. In other sectors, things are stagnant in terms of sales. With regard to rents: there is already a renegotiation in the direction of reduction and this will become even clearer after the lifting of the state of emergency, when in order to restore the activity of companies, it will be necessary to specify some fixed costs, such as rents.
In the medium term, of course, there will be a movement in the real estate market. This is expected to be the result of the market of ready-made homes for which there are willing buyers. With regard to office and retail space, the movement will be more in the direction of renegotiating rents and even rethinking the areas used before the crisis and the real need in the new situation if possible to use alternative forms of work, such as work from home, for example.
In the long run, the real estate market will gradually recover, as this is a key sector of the economy. It is important how long the problems with COVID-19 will last, because in order to talk about the recovery of the residential real estate market, on the one hand there must be a construction product to be offered on the market, on the other - the purchasing power of buyers in person of the able-bodied part of the population, and on the third hand - there must be suitable credit products to be offered by commercial banks.
I would like to emphasize the role of expert assessment in this dynamic real estate market - before, during and after COVID-19. In fact, it is the expertly derived market value by a certified appraiser that is the adjustment sought by all three parties - seller, buyer and bank. We notice the tendency for the clients to realize the need for an assessment even before it is officially requested by the bank. In recent weeks, we have been approached by clients to assess the potential property for purchase as soon as they receive their preliminary loan approval. We are looking for expert professional opinion, based on experience and expertise, to guide them to the current state of the market.
What development do you expect in the market in terms of the following indicators
- market activity: in the short term - low, in the medium term - weak market and in the long term - gradual recovery of activity.
- supply and demand for sale - there are settlements where the potential for supply is very limited and the entry of new projects on the market there will find its realization. On the other hand, there are a lot of started projects in Sofia, and here the condition will be important whether the builders will be able to go through the crisis with the lowest possible damage to their business and workforce. Some of the projects are likely to be halted and a better situation will be expected, including the opportunity to obtain resources from commercial banks on favorable terms. The projects of established investors are expected to hit the market at the beginning of the summer. Of course, there will be speculative buyers who will wait for prices to fall and buy, but in general, at least until the end of the year, the attention of buyers will be more committed to maintaining jobs and living standards than to new purchases. The possibility to negotiate more permanently favorable rental conditions will also work in the "waiting" direction.
- old construction, new construction and green buildings - it is very likely that green transactions will decrease or be forgotten for some time; with regard to the new construction, the realization will be slower and bigger discounts will be sought; in the case of old construction, the location of the specific dwelling has the greatest influence.
- Mortgage purchases and investment purchases: investment purchases will decrease and even freeze by the time the economy and jobs recover. As for mortgage purchases, they will continue, with banks having the right to limit or even temporarily exclude green purchases and reallocate resources in the various phases of construction - for new projects. The possibility of cash buyers entering the market ready to negotiate lower prices as a result of the crisis should not be ruled out.
- rental market - we expect a decline in rents, mostly dictated by the fact that many people lose their jobs and some even leave Sofia and return to their native places.
- urban and suburban properties (suburban and rural houses, holiday properties, etc.) - there is a feeling that people should look for the purchase of such objects, especially in a period when physical distancing comes to the fore. However, this is a serious market segment and we do not expect much movement there. Buyers who are interested in such properties will monitor the movement of prices and will react accordingly in the presence of advantageous offers.